Correlation Between Natural Gas and Petrofac
Can any of the company-specific risk be diversified away by investing in both Natural Gas and Petrofac at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Natural Gas and Petrofac into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Natural Gas Services and Petrofac Ltd ADR, you can compare the effects of market volatilities on Natural Gas and Petrofac and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Natural Gas with a short position of Petrofac. Check out your portfolio center. Please also check ongoing floating volatility patterns of Natural Gas and Petrofac.
Diversification Opportunities for Natural Gas and Petrofac
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Natural and Petrofac is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Natural Gas Services and Petrofac Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petrofac ADR and Natural Gas is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Natural Gas Services are associated (or correlated) with Petrofac. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petrofac ADR has no effect on the direction of Natural Gas i.e., Natural Gas and Petrofac go up and down completely randomly.
Pair Corralation between Natural Gas and Petrofac
Considering the 90-day investment horizon Natural Gas Services is expected to generate 0.29 times more return on investment than Petrofac. However, Natural Gas Services is 3.41 times less risky than Petrofac. It trades about 0.11 of its potential returns per unit of risk. Petrofac Ltd ADR is currently generating about -0.03 per unit of risk. If you would invest 2,040 in Natural Gas Services on November 2, 2024 and sell it today you would earn a total of 645.00 from holding Natural Gas Services or generate 31.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Natural Gas Services vs. Petrofac Ltd ADR
Performance |
| Timeline |
| Natural Gas Services |
| Petrofac ADR |
Natural Gas and Petrofac Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Natural Gas and Petrofac
The main advantage of trading using opposite Natural Gas and Petrofac positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Natural Gas position performs unexpectedly, Petrofac can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Petrofac will offset losses from the drop in Petrofac's long position.| Natural Gas vs. Enerflex | Natural Gas vs. Forum Energy Technologies | Natural Gas vs. Archrock | Natural Gas vs. Geospace Technologies |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
Other Complementary Tools
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance |